SCRAPPED MEGA PROJECTS IN DUBAI POSING THREAT TO STEEL INDUSTRY IN PAKISTAN

INTERVIEW MUHAMMAD KHALID KHAN, CHIEF OPERATING OFFICER ABBAS STEEL GROUP

AMANULLAH BASHAR
Mar 16 - 22, 2009

Pakistan has huge natural resources that include reserves of iron ore, which has not been tapped effectively due to unknown reasons. Muhammed Khalid Khan, Chief Operating Officer of Abbas Steel Group, which is running three steel projects including two automatic plants and one manual, pointed this out.

He disclosed in an interview that the company has an intention to go into exploration of iron ore to make this sector self sufficient in raw material instead of depending upon the imported scraps.

He said that certain areas in NWFP, Balochistan and even in Punjab have proven iron ore deposits, which would be enough to cater to local needs for decades to come.

Pakistan has yet to go a long way for its economic development especially the infrastructure development would require iron steel products in huge quantity. Currently, our steel industry is proving jobs to over 150,000 and by the grace of god no layoffs have been done so far despite economic recession and low demand. However, the government can give a boost to the economic activity by inducing support to this economic segment imperative for infrastructure development. This is an area where huge foreign investment can also come to Pakistan for which we have to improve our image outside the country on one hand and improve the law and order situation within the country on the other hand.

The financial meltdown and worldwide economic recession had its impact on Dubai economy where huge development projects either have been shelved or scrapped. As a result, at least one million ton of quality steel is lying with the banks that sponsored those projects and are now disposing off this steel at force or throwaway prices.

This happening is attracting the commercial importers of steel but this would severally affect local industry, which is already passing through depression due to low demands. Khalid said that in Pakistan there are only 8-10 automatic steel plants producing quality steel products while over 350 units manually operated are producing low quality products.

This is the time to protect the local industry by introducing regulatory duty on import of such material, which is available temporarily but might endanger the economic survival of the local industries. He recalled that there was a time when the steel was being sold at $600 a ton in the international market, then came down to the level of $270 per ton.

When asked that why steel prices have not come down accordingly in Pakistan, he said that actually the benchmark for price fixation is the Pakistan Steel Mills, which sets the price pattern in the country while the foundries producing low quality steel products take advantage by selling their products little below the Pakistan Steel prices. Actually the steel sector is quite capable of catering to the market need in Pakistan while influx of scraps from ship breaking are also suffice the supply of raw material to the foundries. He said this is the time to levy at least 25 percent regulatory duty to check the arrival of cheaper steel from Dubai.

Steep fall in steel prices is one of the interesting side effects of the world financial crisis following scrap of mega development projects and phenomenal drop in shipping cargo.

The steel price, which touched Rs95000 per ton at one time, is now touching rock bottom even below Rs45000 tons primarily due to adequate supply of iron sheets from Gaddani's ship breaking industry where over 28 ships are waiting in queue for breaking.

It is interesting to note that following the drop in shipping cargo most of the shipping operators are disposing off their ships at throwaway prices. Some of these ships are calling at Gaddani beach and at Dhaka ship breaking yard where the ship breaking business is running in top gear, which is expected to lead a further cut in steel prices in the coming days.

He is of the view that in the wake of the cheaper pries of steel products, low costs of cement and other inputs we can ignite a spark in the construction industry by making bank finances at affordable prices. Construction industry, which has over 35 allied industries in the downstream, would help overcoming the problem of unemployment, which is aggravating with every passing day.

In fact, higher financial cost makes the manufacturing units sick and consequently adds to non-performing loans in the banking system. In fact, the economic segment, which has the potential, should be given subsidies instead of their withdrawal under WTO requirement. He cited the example of the United States, which is the author of the WTO and giving full protection to its agriculture sectors besides levying tariff barriers and anti-dumping duties to block the influx of foreign products. Why Pakistan should not protect its domestic industries, he asked.

He said Pakistan is lucky to have over 50 percent population below 35 years of age, which places us as a young nation. In fact, human resource development can do magic to the economic growth of this country and all assistance should be allocated for human resource development.

When his attention was invited towards the cost of education in Pakistan, which is beyond the reach of 70 percent of population, he said in fact it is the responsibility of the government to bear the cost of education at least up to metric level even in the private schools. So far, only government schools are providing this facility but their quality is so poor that people avoid sending their children in government sponsored schools. Hence, the government should also finance the private schools up to a metric level to achieve the target of human resources development, as education is the fundamental right of every citizen.

Khalid who hails from Mansehra of NWFP was staunch supporter of the national language and its use as a medium for education, which would help promotion literacy rate in Pakistan. The books, which are taught even in Urdu, are not nicely produced to impart knowledge in the younger generation. This sector is vitally important to overcome economic crisis in the end, he emphasized.

ABOUT ABBAS STEEL GROUP

This group came into being in 1988 with the acquisition of Abbas Steel Industries private Limited. Abbas Steel was quick to establish itself in the Pakistani market as a consistent high quality manufacturer of re-rolled steel products. The success of Abbas Steel prompted the group to expand by purchasing Al-Abbas Steel as well in 1989. With capacity in excess of 70,000 metric tons per annum, the group came to the forefront of the dynamic and rapidly growing steel re-rolling sector in the country.

At present, Abbas Steel Group of Companies has a production capacity of 190,000 metric tons per annum, arguably the most prolific steel group operating in Pakistan.